PROSPECTUS SUPPLEMENT
(To Prospectus dated November 15, 1999)
$300,000,000
Jersey Central Power & Light Company
MEDIUM-TERM NOTES
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Due From One Year to 35 Years From Date of Issue
---------------
Jersey Central Power & Light Company may offer from time to time its medium-term
notes. The specific terms of any notes offered will be included in a pricing
supplement. Unless the pricing supplement provides otherwise, the notes offered
will have the following general terms:
- - The notes will mature from one - The notes will be held in
to 35 years from the date of global form by The
issue. Depository Trust Company,
- - The notes will bear interest unless otherwise specified.
at either a fixed or a - The notes may be subject to
floating rate. Floating rate redemption and repurchase
interest will be based on: as specified in this
- LIBOR prospectus supplement and
- Any other rate specified the accompanying prospectus
in the applicable pricing or in the applicable
supplement. pricing supplement.
- - Interest will be paid on the - The notes will be in
notes on the dates specified minimum denominations of
in the applicable pricing $1,000, increased in
supplement. multiples of $1,000.
The notes will be issued under a Senior Note Indenture between Jersey Central
Power & Light Company and United States Trust Company of New York, as senior
note trustee. Initially, the notes will be secured by one or more series of our
first mortgage bonds which will be issued and delivered to the senior note
trustee under our Indenture dated as of March 1, 1946, as amended and
supplemented. However, on the date that the senior note trustee holds 80% or
more of all of our outstanding first mortgage bonds, the notes will no longer be
secured by any first mortgage bonds. At that time, the notes will be unsecured
obligations of Jersey Central Power & Light Company and will rank equally with
all of our other unsecured and unsubordinated indebtedness.
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Price to Agents' Proceeds to
Public Commissions Company
------------- ------------------- ------------------------
Per Note 100% .125% - .750% 99.875%-99.250%
Total $300,000,000 $375,000-$2,250,000 $299,625,000-$297,750,000
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of these securities, or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated and J.P. Morgan Securities Inc. will solicit
offers to purchase the notes as agents for Jersey Central Power & Light Company.
The agents have agreed to use their reasonable efforts to sell the notes.
---------------
MORGAN STANLEY DEAN WITTER J.P. MORGAN & CO.
November 15, 1999
You should read and rely only on the information incorporated by reference or
provided in this prospectus supplement or the accompanying prospectus. We have
not authorized anyone else to provide you with different information. Neither we
nor the Agents are making an offer of these securities in any state where the
offer is not permitted. You should not assume that the information in this
prospectus supplement or the accompanying prospectus, or incorporated by
reference, is accurate as of any date other than the date such information is
given.
Table of Contents
Prospectus Supplement
Page
Introductory Statement ............................................. S-2
Jersey Central Power & Light Company ............................... S-2
Use of Proceeds .................................................... S-2
Description of the Notes ........................................... S-2
Plan of Distribution ............................................... S-9
Prospectus
About This Prospectus .............................................. 3
Jersey Central Power & Light Company ............................... 3
Where You Can Find More Information ................................ 4
Use of Proceeds .................................................... 4
Ratios of Earnings to Fixed Charges ................................ 5
Description of Senior Notes ........................................ 5
Description of Senior Note Mortgage Bonds........................... 23
Plan of Distribution ............................................... 28
Legal Matters ...................................................... 29
Experts ............................................................ 30
INTRODUCTORY STATEMENT
Jersey Central Power & Light Company (the "Company") is offering medium
term notes (the "Notes"), in the principal amount of $300,000,000. If the
Company sells other Senior Notes as described in the accompanying prospectus,
the aggregate principal amount of Notes that the Company may offer and sell
under this prospectus supplement would be reduced.
The Company intends to use this prospectus supplement, the accompanying
prospectus and a related pricing supplement to offer the Notes from time to
time. This prospectus supplement provides you with certain terms of the Notes
and supplements the description of Senior Notes contained in the accompanying
prospectus. If any information in this prospectus supplement is inconsistent
with the prospectus, this prospectus supplement replaces the inconsistent
information. Each time the Company issues Notes, it will prepare a pricing
supplement that will contain additional terms of the offering and the
description of the specific Notes offered. The pricing supplement also may add,
update or change information in this prospectus supplement or the accompanying
prospectus, including provisions describing the calculation of interest and the
method of making payments under the terms of a Note. Any information in the
pricing supplement that is inconsistent with this prospectus supplement or the
accompanying prospectus will replace the inconsistent information in this
prospectus supplement or the accompanying prospectus.
JERSEY CENTRAL POWER & LIGHT COMPANY
The Company, a public utility furnishing electric service within New
Jersey, is a wholly owned subsidiary of GPU, Inc., a holding company registered
under the Public Utility Holding Company Act of 1935. The Company, which does
business under the name "GPU Energy", provides electric service within a
territory located in northern, western and east central New Jersey having a
population of about 2.6 million. The Company's principal executive offices are
located at 2800 Pottsville Pike, Reading, Pennsylvania 19605, and its telephone
number is (610) 929-3601.
USE OF PROCEEDS
The Company will use the net proceeds from the sale of the Notes (1) to
redeem or repurchase other outstanding securities of the Company, (2) to reduce
the Company's short-term borrowings, (3) for construction purposes and (4) for
other corporate purposes, including to reimburse the Company's treasury for
funds previously expended for the purposes described above.
DESCRIPTION OF THE NOTES
The following is a summary of certain terms of the Notes, does not purport
to be complete, and is subject to, and qualified in its entirety by, the
description of Senior Notes in the accompanying
S-2
prospectus, the form of the Senior Note Indenture (as defined below), which is
on file with the Securities and Exchange Commission, and the Trust Indenture Act
of 1939. Certain capitalized terms used in this prospectus supplement are
defined in the Senior Note Indenture. The following description of certain terms
of the Notes supplements and, to the extent inconsistent therewith, replaces the
description of the general terms and provisions of the Senior Notes set forth in
the accompanying prospectus, to which reference is hereby made. The following
description will apply unless otherwise specified in an applicable pricing
supplement.
General
Each series of the Notes will be issued as a series of Senior Notes under
the Senior Note Indenture, as it may be amended or supplemented from time to
time (the "Senior Note Indenture") between the Company and United States Trust
Company of New York (the "Senior Note Trustee"). Until the Release Date (as
defined below), all of the Senior Notes, including the Notes, outstanding under
the Senior Note Indenture will be secured by one or more series of the Company's
Senior Note Mortgage Bonds issued and delivered by the Company to the Senior
Note Trustee. The Senior Note Mortgage Bonds are first mortgage bonds ("First
Mortgage Bonds") to be issued under and secured by the Company's Indenture dated
as of March 1, 1946 (the "Mortgage") between the Company and United States Trust
Company of New York, as successor trustee, as heretofore amended and
supplemented. See "Description of Senior Notes -- Security; Release Date" in the
accompanying prospectus. The Release Date is the earlier of (1) the date that
all First Mortgage Bonds, other than the Senior Note Mortgage Bonds, have been
retired (whether at, before or after the maturity thereof) through payment,
redemption, purchase, defeasance or otherwise and (2) the date upon which the
Senior Note Trustee holds Senior Note Mortgage Bonds constituting 80% or more of
all of our outstanding First Mortgage Bonds. On the Release Date, the Senior
Note Trustee will surrender the Senior Note Mortgage Bonds for cancellation and
the Notes will cease to be secured by the Senior Note Mortgage Bonds, will
become unsecured general obligations of the Company and will rank on a parity
with other unsecured and unsubordinated indebtedness of the Company. As of the
date of this prospectus supplement, approximately $1,174 million of First
Mortgage Bonds remain outstanding, none of which are Senior Note Mortgage Bonds.
The Senior Note Indenture provides that prior to the Release Date, the principal
amount of Senior Notes (including the Notes) that may be issued and outstanding
cannot exceed the principal amount of the Senior Note Mortgage Bonds then held
by the Senior Note Trustee. After the issuance of the first series of the Senior
Notes, no additional First Mortgage Bonds will be issued under the Mortgage
other than as collateral security for the Senior Notes. See "Description of
Senior Note Mortgage Bonds" in the accompanying prospectus.
For further information concerning the Notes, see "Description of Senior
Notes" in the accompanying prospectus.
The Notes will be offered on a continuous basis and will mature on any
Business Day (as defined below) from one year to 35
S-3
years from the date of issue, as selected by the purchaser and agreed to by the
Company. Prior to maturity, the Notes may be subject to optional redemption by
the Company as set forth under "Interest and Interest Rates -- Fixed Rate Notes"
below and under "Description of Senior Notes -- Redemption Provisions" in the
accompanying prospectus, or as set forth in the applicable pricing supplement.
Each Note will bear interest at a fixed or floating rate as specified in the
applicable pricing supplement.
The pricing supplement relating to each Note will describe the following
terms: (1) the title of such Notes; (2) the aggregate principal amount of such
Notes; (3) the date on which such Notes will be issued (the "Original Issue
Date"); (4) the price (expressed as a percentage of principal amount) at which
such Notes will be issued; (5) the date or dates on which the principal of such
Notes is payable; (6) the rate or rates at which such Notes will bear interest
(or the basis or formula with reference to which such rate or rates will be
determined), the date or dates from which such interest will accrue, the dates
on which such interest will be payable ("Interest Payment Dates"), and the
regular record dates for the interest payable on such Interest Payment Dates;
(7) the option, if any, of the Company to redeem such Notes and the period or
periods within which, or the date or dates on which, the prices at which and the
terms and conditions upon which, such Notes may be redeemed, in whole or in
part, upon the exercise of such option; (8) the obligation, if any, of the
Company to redeem or purchase such Notes at the option of the registered holder
or pursuant to any sinking fund or analogous provisions and the period or
periods within which, or the date or dates on which, the price or prices at
which and the terms and conditions upon which, such Notes will be redeemed or
purchased, in whole or in part, pursuant to such obligation; (9) the
denominations in which such Notes will be issuable, if other than $1,000 and
integral multiples thereof; and (10) any other terms of such Notes, including
with respect to any series, if applicable.
With respect to Notes for which interest is based on the LIBOR index,
"Business Day" shall mean a Business Day as defined in the accompanying
prospectus that is also a London Business Day. "London Business Day" means a day
on which commercial banks are open for business (including dealings in United
States dollars) in London. Unless the Company otherwise specifies in the
applicable pricing supplement, the "regular record date" with respect to any
Interest Payment Date will be the fifteenth day of the calendar month
immediately preceding such Interest Payment Date (whether or not a Business
Day). See "Description of Senior Notes -- Payment of Principal and Interest" in
the accompanying prospectus.
Except under certain circumstances, the Company will issue the Notes in
book-entry form only. See "Description of Senior Notes -- Book-Entry Senior
Notes" in the accompanying prospectus.
Interest and Interest Rates
General
S-4
In the related pricing supplement, the Company will designate each Note as
a Fixed Rate Note or a Floating Rate Note and describe the method of determining
the interest rate, including any Spread and/or Spread Multiplier. The Company
may also specify a maximum and a minimum interest rate in the related pricing
supplement.
Interest rates on the Notes that the Company offers may differ depending
upon, among other things, the aggregate principal amount of Notes purchased in
any single transaction. The Company may offer Notes with similar variable terms
but different interest rates, as well as Notes with different variable terms
concurrently to different investors. The Company may, from time to time, change
the interest rates or formulas and other terms of Notes, but no such change will
affect any Note already issued or as to which an offer to purchase has been
accepted.
Fixed Rate Notes
In the pricing supplement for Fixed Rate Notes, the Company will specify a
fixed interest rate payable per annum in arrears on the Interest Payment Dates.
The Interest Payment Dates for Fixed Rate Notes will be August 1 and February 1
of each year or on such other date(s) specified in the applicable pricing
supplement. Interest on Fixed Rate Notes will be computed on the basis of a
360-day year of twelve 30-day months. If the maturity date or an Interest
Payment Date for any Fixed Rate Note is not a Business Day, the Company will pay
principal, any premium, and any interest for that Note on the next Business Day
with the same force and effect as if made on such date, and no interest will
accrue from and after the maturity date or Interest Payment Date.
Unless the Company otherwise specifies in the applicable pricing
supplement, the Fixed Rate Notes may be redeemable as set forth under
"Description of Senior Notes -- Redemption Provisions" in the accompanying
prospectus. For purposes of such discussion in the accompanying prospectus,
"Reference Treasury Dealer" means each of Morgan Stanley & Co. Incorporated and
J.P. Morgan Securities Inc. and their respective successors. If either of the
foregoing shall cease to be a primary U.S. Government securities dealer (a
"Primary Treasury Dealer"), the Company shall substitute another nationally
recognized investment banking firm that is a Primary Treasury Dealer.
Floating Rate Notes
Unless otherwise specified in a pricing supplement, each Floating Rate
Note will have an interest rate basis or formula based on LIBOR.
In the pricing supplement, the Company will indicate the Index Maturity as
well as any Spread and/or Spread Multiplier which would be applied to the
interest rate formula to determine the interest rate. Any Floating Rate Note may
have a maximum or minimum interest rate limitation. In addition to any maximum
interest rate limitation, the interest rate on the Floating Rate Notes will in
no event be higher than the maximum rate permitted by New York law, as the same
may be modified by United States law of general application.
S-5
The "Spread" is the number of basis points (one one-hundredth of a
percentage point) to be added to or subtracted from the related basis or bases
applicable to such Floating Rate Note. The "Spread Multiplier" is the percentage
of the related basis or bases applicable to such Floating Rate Note and by which
such basis or bases will be multiplied to determine the applicable interest rate
on such Floating Rate Note. The "Index Maturity" is the period to maturity of
the instrument or obligation with respect to which the related basis or bases
will be calculated.
The Company will appoint a calculation agent to calculate interest rates
on the Floating Rate Notes. Unless the Company identifies a different party in
the pricing supplement, the paying agent appointed by the Company (initially,
United States Trust Company of New York) will be the calculation agent for each
Note. Each Floating Rate Note will have a specified "Interest Reset Date",
"Interest Determination Date" and, where applicable, "Calculation Date"
associated with it. An "Interest Reset Date" is the date on which the interest
rate on the Note is subject to change and, unless otherwise specified in a
pricing supplement, will be the second London Business Day immediately following
the applicable Interest Determination Date. An "Interest Determination Date" is
the date as of which the new interest rate is determined for a particular
Interest Reset Date, based on the applicable interest rate basis or formula as
of that Interest Determination Date. The "Calculation Date" is the date by which
the calculation agent will determine the new interest rate that became effective
on a particular Interest Reset Date based on the applicable interest rate basis
or formula on the Interest Determination Date. The interest rate determined by
the calculation agent, absent manifest error, shall be binding and conclusive
upon beneficial owners and holders of Floating Rate Notes and on the Company.
Promptly on such determination, the calculation agent will notify the Senior
Note Trustee and the paying agent (if the calculation agent is not the paying
agent) of the new interest rate.
Change Of Interest Rate. The Company may reset the interest rate on each
Floating Rate Note daily, weekly, monthly, quarterly, semi-annually, annually or
on some other basis that the Company specifies. The Interest Reset Date will be
specified in the pricing supplement.
The related pricing supplement will describe the initial interest rate or
interest rate formula on each Note. That rate is effective until the following
Interest Reset Date. Thereafter, the interest rate will be the rate determined
on each Interest Determination Date. Each time a new interest rate is
determined, it becomes effective on the subsequent Interest Reset Date. Unless
otherwise specified in a pricing supplement, if any Interest Reset Date is not a
Business Day, then the Interest Reset Date will be postponed to the next
Business Day, except if the next Business Day is in the next calendar month, the
Interest Reset Date will be the immediately preceding Business Day.
Date Interest Rate Is Determined. Unless otherwise specified in a pricing
supplement, the Interest Determination
S-6
Date will be the second London Business Day immediately preceding the applicable
Interest Reset Date.
Calculation Date. Unless the Company specifies a different date in a
pricing supplement, the "Calculation Date", where applicable, relating to an
Interest Determination Date will be the earlier of
(1) the tenth calendar day after such Interest Determination Date or, if
such day is not a Business Day, the next succeeding Business Day, or
(2) the Business Day immediately preceding the relevant Interest Payment
Date or the maturity date, as the case may be.
Upon the request of the beneficial holder of any Floating Rate Note, the
calculation agent will provide the interest rate then in effect and, if
different, the interest rate that will become effective on the next Interest
Reset Date for the Floating Rate Note.
Payment Of Interest. The Company will pay installments of interest on
Floating Rate Notes on the Interest Payment Dates specified in the applicable
pricing supplement.
The Company will also pay interest at maturity, redemption or repurchase.
If an Interest Payment Date is not a Business Day, such Interest Payment
Date will be postponed to the next succeeding Business Day, except that in the
case of a Floating Rate Note as to which LIBOR is the applicable interest rate
basis and such Business Day falls in the next succeeding calendar month, such
Interest Payment Date will be the immediately preceding Business Day. If the
maturity date, date of redemption or repurchase of any Floating Rate Note is not
a Business Day, principal, premium, if any, and interest for that Note will be
paid on the next Business Day, and no interest will accrue from and after the
maturity date, date of redemption or repurchase.
The Company will calculate accrued interest on a Floating Rate Note by
multiplying the principal amount of a Note by an accrued interest factor. The
accrued interest factor is the sum of the interest factors calculated for each
day in the period for which accrued interest is being calculated. The interest
factor for each day is computed by dividing the interest rate in effect on that
day by 360. All percentages resulting from any calculation are rounded to the
nearest one hundredth of a percentage point, with five one-thousandths of a
percentage point rounded upward. For example, 9.875% (or .09875) will be rounded
to 9.88% (or .0988). Dollar amounts used in the calculation are rounded to the
nearest cent (with one-half cent being rounded upward).
Calculation Of Interest
S-7
On each Interest Determination Date, the calculation agent will
determine LIBOR as follows:
- If the pricing supplement specifies "LIBOR Telerate", LIBOR on any
Interest Determination Date will be the rate for deposits in United
States dollars having the Index Maturity described in the related
pricing supplement on the applicable Interest Reset Date, as such
rate appears on the Designated LIBOR Page as of 11:00 A.M., London
time, on that Interest Determination Date.
- If the pricing supplement specifies "LIBOR Reuters", LIBOR on any
Interest Determination Date will be the arithmetic mean of the
offered rates (unless the Designated LIBOR Page by its terms
provides only for a single rate, in which case such single rate
shall be used) for deposits in United States dollars having the
Index Maturity described in the related pricing supplement on the
applicable Interest Reset Date, as such rates appear on the
Designated LIBOR Page as of 11:00 A.M., London time, on that
Interest Determination Date, if at least two such offered rates
appear (unless, as aforesaid, only a single rate is required) on the
Designated LIBOR Page.
- If the pricing supplement does not specify "LIBOR Telerate" or
"LIBOR Reuters", the LIBOR Rate will be LIBOR Telerate. In addition,
if the Designated LIBOR Page by its terms provides only for a single
rate, that single rate will be used regardless of the foregoing
provisions requiring more than one rate.
On any Interest Determination Date on which fewer than the required
number of applicable rates appear or no rate appears on the applicable
Designated LIBOR Page, the calculation agent will determine LIBOR as follows:
- LIBOR will be determined on the basis of the offered rates at
which deposits in United States dollars having the Index Maturity
described in the related pricing supplement on the Interest
Determination Date and in a principal amount that is representative
of a single transaction in that market at that time are offered by
four major banks in the London interbank market at approximately
11:00 A.M., London time, on the Interest Determination Date to prime
banks in the London interbank market. The calculation agent will
select the four banks and request the principal London office of
each of those banks to provide a quotation of its rate for deposits
in United States dollars. If at least two quotations are provided,
LIBOR for that Interest Determination Date will be the average of
those quotations.
- If fewer than two quotations are provided as mentioned above,
LIBOR will be the average of the rates quoted by three major banks
in The City of New York
S-8
selected by the calculation agent at approximately 11:00 A.M. in The
City of New York, on the Interest Determination Date for loans to
leading European banks in United States dollars having the Index
Maturity designated in the pricing supplement and in a principal
amount that is representative for a single transaction in United
States dollars in that market at that time. The calculation agent
will select the three banks referred to above.
- If fewer than three banks selected by the calculation agent are
quoting as mentioned above, LIBOR will remain LIBOR then in effect
on that Interest Determination Date.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated
in the applicable pricing supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for United States dollars, or (b) if "LIBOR Telerate" is designated in the
applicable pricing supplement, the display on the Dow Jones Telerate Service for
the purpose of displaying the London interbank rates of major banks for United
States dollars. If neither LIBOR Reuters nor LIBOR Telerate is specified in the
applicable pricing supplement, LIBOR will be determined as if LIBOR Telerate had
been specified. For United States dollars, LIBOR will be determined as if Page
3750 had been specified. "Page 3750" means the display designated as page "3750"
on the Bridge Telerate, Inc. (or such other page as may replace the 3750 page on
that service or such other service or services as may be nominated by the
British Bankers' Association for the purposes of displaying London interbank
offered rates for United States dollar deposits).
Issuance of Additional First Mortgage Bonds
The Senior Note Mortgage Bonds will be issued under the Mortgage against
property additions and/or previously retired First Mortgage Bonds. At September
30, 1999, the Company had available property additions sufficient to permit it
to issue a maximum of approximately $361 million aggregate principal amount of
additional Senior Note Mortgage Bonds. In addition, the Company could issue
approximately $361 million aggregate principal amount of Senior Note Mortgage
Bonds on the basis of previously retired First Mortgage Bonds. See "Description
of Senior Note Mortgage Bonds -- Issuance of Additional First Mortgage Bonds" in
the accompanying prospectus.
At September 30, 1999, the Company had approximately $884 million of
retained earnings available for the declaration of payment of dividends on the
Company's common stock pursuant to the restrictions contained in the Mortgage,
as described under "Description of Senior Note Mortgage Bonds -- Dividend
Restrictions" in the accompanying prospectus.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the
S-9
Distribution Agreement between the Company and the Agents, the Notes are being
offered on a continuous basis by the Company through Morgan Stanley & Co.
Incorporated and J.P. Morgan Securities Inc. (individually, an "Agent" and
collectively, the "Agents"), who have agreed to use reasonable efforts to
solicit offers to purchase Notes. The Company will have the sole right to accept
offers to purchase Notes and may reject any offer to purchase Notes in whole or
in part. An Agent will have the right to reject any offer to purchase Notes
solicited by it in whole or in part. Payment of the purchase price of the Notes
will be required to be made in immediately available funds. The company will pay
an Agent, in connection with sales of Notes resulting from a solicitation made
or an order to purchase received by such Agent, a commission ranging from .125%
to .750% of the principal amount of Notes to be sold; provided, however, that
commissions with respect to Notes maturing more than thirty years from the date
of issue will be negotiated.
The Company may sell Notes directly to investors. In this case, no
underwriters or agents would be involved. No commission will be payable on Notes
the Company sells directly to investors.
The Company may accept offers to purchase Notes through other agents and
may appoint additional agents for the purpose of soliciting offers to purchase
Notes, in either case on terms substantially identical to the terms contained in
the Distribution Agreement with the Agents. Any other additional agents will be
named in the applicable pricing supplement.
If the Company sells Notes to an Agent as principal, it will purchase the
Notes for its own account at a discount to be agreed upon by the Company and the
Agent at the time of sale. Unless otherwise stated in the applicable pricing
supplement, the discount will be within the range of .125% to .750% of the
principal amount per Note. The Agents may resell the Notes in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. In addition, the
Agents may offer Notes they have acquired as principal to other dealers. The
Agents may sell Notes to any dealer at a discount and that discount will not be
in excess of the discount received by the Agent from the Company, unless
specified in the applicable pricing supplement. The obligations of the Agents to
purchase the Notes as principal will be subject to certain conditions. After the
initial public offering of Notes to be resold to investors and other purchasers,
the public offering price and any discounts or concessions allowed or re-allowed
or paid to dealers may be changed from time to time.
The Agents may engage in transactions that stabilize, maintain or
otherwise affect the price of the Notes. Specifically, the Agents may overallot
in connection with the offering, creating a short position in the Notes for
their own account. In addition, to cover overallotments or to stabilize the
price of the Notes, the Agents may bid for, and purchase, the Notes, in the open
market. Finally, the Agents may reclaim selling concessions allowed to any agent
or a dealer for distributing the Notes in the offering, if the Agents repurchase
previously distributed Notes in transactions to cover syndicate short positions,
in stabilization.
S-10
Underwriters, dealers and agents that participate in the distribution of
the Notes may be underwriters as defined in the Securities Act of 1933, as
amended (the "Act"), and any discounts or commissions received by them from the
Company and any profit on the resale of the Notes by them may be treated as
underwriting discounts and commissions under the Act. The Company has agreements
with the Agents to indemnify them against certain civil liabilities, including
liabilities under the Act, or to contribute with respect to payments which the
Agents may be required to make. The Agents may engage in transactions with, or
perform services for, the Company or its affiliates in the ordinary course of
their business.
The Company does not intend to apply for listing of the Notes on a
national securities exchange. The Agents have advised the Company that they
intend to make a market in the Notes, as permitted by applicable laws and
regulations. However, the Agents are not obligated to do so and may discontinue
making a market at any time. The Company cannot assure you as to the liquidity
of the trading market for the Notes.
S-11
PROSPECTUS
$300,000,000
JERSEY CENTRAL POWER & LIGHT COMPANY
SENIOR NOTES
--------------------
Jersey Central Power & Light Company will be selling Senior Notes from
time to time in an amount not to exceed $300,000,000 pursuant to this prospectus
and supplements to this prospectus.
Each series of Senior Notes will be issued under a Senior Note Indenture
between us and United States Trust Company of New York, as senior note trustee.
Initially, the Senior Notes will be secured by one or more series of our First
Mortgage Bonds which will be issued and delivered to the senior note trustee
under our First Mortgage Bond Indenture dated as of March 1, 1946, as amended
and supplemented. However, on the date that the senior note trustee holds 80% or
more of all of our outstanding First Mortgage Bonds, the Senior Notes will no
longer be secured by any First Mortgage Bonds. At that time, the Senior Notes
will be unsecured obligations of Jersey Central Power & Light Company and will
rank equally with all of our other unsecured and unsubordinated indebtedness.
We will provide the specific terms of each series of Senior Notes, their
offering prices and how they will be offered in supplements to this prospectus.
You should read this prospectus and any applicable supplement carefully before
you invest.
Our principal executive offices are located at 2800 Pottsville Pike,
Reading, Pennsylvania 19605 and our telephone number is (610) 929-3601.
--------------------
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission, nor have these
organizations determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
--------------------
November 15, 1999
You should read and rely only on the information incorporated by reference
or provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. Neither we nor any underwriters,
agents or dealers are making an offer of these securities in any state where the
offer is not permitted. You should not assume that the information in this
prospectus or any supplement, or incorporated by reference, is accurate as of
any date other than the date such information is given.
--------------------
TABLE OF CONTENTS PAGE
- -----------------
About This Prospectus..........................3
Jersey Central Power & Light Company...........3
Where You Can Find More Information............4
Use of Proceeds................................4
Ratios of Earnings to Fixed Charges............5
Description of Senior Notes....................5
Description of Senior Note
Mortgage Bonds................................23
Plan of Distribution .........................28
Legal Matters.................................29
Experts.......................................30
2
ABOUT THIS PROSPECTUS
......This prospectus is part of registration statements that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, we may, from time to time, sell the Senior Notes described
in this prospectus in one or more offerings up to a total dollar amount of
$300,000,000. This prospectus provides you with a general description of the
Senior Notes. Each time we sell a series of Senior Notes, we will provide you
with a supplement to this prospectus that will contain specific information
about the terms of that series. Any supplement may also add, update or change
information contained in this prospectus. Before you invest, you should read
both this prospectus and any supplement to this prospectus together with the
additional information about us described under "Where You Can Find More
Information."
......For more detailed information about the Senior Notes, you can read the
exhibits filed with the registration statement.
JERSEY CENTRAL POWER & LIGHT COMPANY
......Jersey Central Power & Light Company (the "Company"), a public utility
furnishing electric service wholly within the State of New Jersey, is a
subsidiary of GPU, Inc., a holding company registered under the Public Utility
Holding Company Act of 1935. The Company provides retail electric service within
a territory located in northern, western and east central New Jersey having a
population of approximately 2.6 million. The Company's principal executive
offices are located at 2800 Pottsville Pike, Reading, Pennsylvania 19605, and
its telephone number is (610) 929-3601.
......During 1998, residential sales accounted for about 45% of the Company's
operating revenues from customers and 41% of kilowatt-hour sales to customers;
commercial sales accounted for about 39% of the Company's operating revenues
from customers and 40% of kilowatt-hour sales to customers; industrial sales
accounted for about 15% of the Company's operating revenues from customers and
19% of kilowatt-hour sales to customers; and sales to rural electric
cooperatives, municipalities (primarily for street and highway lighting) and
others accounted for about 1% of the Company's operating revenues from customers
and less than 1% of kilowatt-hour sales to customers. The revenues derived from
the 25 largest customers in the aggregate accounted for approximately 9% of
operating revenues from customers for the year 1998. The Company also makes
interchange and spot market sales of electricity to other utilities.
......The electric generating and transmission facilities of the Company and its
affiliates, Pennsylvania Electric Company and Metropolitan Edison Company
(collectively doing business as "GPU Energy"), are physically interconnected and
are operated as a single integrated and coordinated system. The transmission
facilities of the integrated system are physically interconnected with
neighboring nonaffiliated utilities in Pennsylvania, New Jersey, Maryland, New
York and Ohio. The Company is a member of the Pennsylvania-New Jersey-Maryland
Interconnection ("PJM") and
3
the Mid-Atlantic Council, an organization providing coordinated review of the
planning by utilities in the PJM area. The interconnection facilities are used
for substantial capacity and energy interchange and purchased power transactions
as well as emergency assistance.
WHERE YOU CAN FIND MORE INFORMATION
......The Company, a New Jersey corporation, files annual, quarterly and current
reports and other information with the Securities and Exchange Commission under
File No. 1-3141. These Securities and Exchange Commission filings are available
to the public over the Internet at the Securities and Exchange Commission's web
site at http://www.sec.gov. You may also read and copy any of these Securities
and Exchange Commission filings at the Securities and Exchange Commission's
public reference room in Washington, D.C. located at 450 Fifth Street, N.W.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information about the operation of the public reference room. Some of our
securities are listed on the New York Stock Exchange and such reports and other
information can also be inspected and copied at the offices of such exchange on
the 7th Floor, 20 Broad Street, New York, New York.
......The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is an important part of this prospectus
and should be read with the same care. Information that we file later with the
Securities and Exchange Commission will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we make with the Securities and Exchange Commission under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until we sell
all of the Senior Notes described in this prospectus.
- - Our Annual Report on Form 10-K for the year ended December 31, 1998.
- - Our Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30
and September 30, 1999.
- - Our Current Reports on Form 8-K dated April 16, May 26, August 5, September
15, October 19 and November 5, 1999.
You may request a free copy of these filings by writing or telephoning us
at the following address: Jersey Central Power & Light Company, 2800 Pottsville
Pike, Reading, Pennsylvania 19605, attention: Secretary. Our telephone number is
(610) 929-3601.
USE OF PROCEEDS
Except as shall otherwise be provided in a supplement to this prospectus,
the Company intends to use the net proceeds from the sale of the Senior Notes
offered from time to time:
4
- - to redeem other outstanding securities of the Company, including first
mortgage bonds, preferred stock and preferred securities,
- - to repay outstanding short-term bank loans or other unsecured indebtedness,
- - for construction purposes and
- - for other corporate purposes, including to reimburse the Company's treasury
for funds previously expended for the above purposes.
The use of proceeds with respect to a particular series of Senior Notes will be
set forth in the related supplement to this prospectus.
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's Ratio of Earnings to Fixed Charges for each of the periods
indicated was as follows:
Years ended December 31, Twelve Months
------------------------ ended
September 30, 1999
1994 1995 1996 1997 1998 (unaudited)
- ---- ---- ---- ---- ---- --------------
3.09 3.44 2.89 3.57 4.01 3.49
The Ratio of Earnings to Fixed Charges represents, on a pre-tax basis, the
number of times earnings cover fixed charges. Earnings consist of net income to
which has been added fixed charges and taxes based on income of the Company.
Fixed charges consist of interest on funded indebtedness, other interest
(including distributions on Company Obligated Mandatorily Redeemable Preferred
Securities), amortization of net gain on reacquired debt and net discount on
debt and the interest portion of all rentals charged to income.
DESCRIPTION OF SENIOR NOTES
The following is a summary of certain terms and provisions of the Senior
Notes and the Senior Note Indenture (as defined below). Reference is made to the
Senior Note Indenture which is an exhibit to the registration statement of which
this prospectus forms a part.
General
The Senior Notes may be issued from time to time in one or more series in
amounts and on terms to be determined at or prior to the time or times of sale,
under the Senior Note Indenture, as it may be amended or supplemented (the
"Senior Note Indenture"), between the Company and United States Trust Company of
New York (the "Senior Note Trustee").
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Until the Release Date (as defined below), all of the Senior Notes
outstanding under the Senior Note Indenture will be secured by one or more
series of the Company's Senior Note Mortgage Bonds (as defined below) issued and
delivered by the Company to the Senior Note Trustee. See "-- Security; Release
Date." On the Release Date, the Senior Notes will cease to be secured by the
Senior Note Mortgage Bonds, will become unsecured general obligations of the
Company and will rank on a parity with other unsecured and unsubordinated
indebtedness of the Company. The Senior Note Indenture provides that prior to
the Release Date, the principal amount of the Senior Notes that may be issued
and outstanding cannot exceed the principal amount of the Senior Note Mortgage
Bonds then held by the Senior Note Trustee. See "Description of Senior Note
Mortgage Bonds -- Issuance of Additional First Mortgage Bonds."
There is no requirement under the Senior Note Indenture that future issues
of debt securities of the Company be issued exclusively under the Senior Note
Indenture; accordingly, the Company will be free to employ other indentures or
documentation, containing provisions different from those included in the Senior
Note Indenture or applicable to one or more issues of Senior Notes, in
connection with future issues of other debt securities.
There is no limitation on the amount of Senior Notes that may be issued
under the Senior Note Indenture. However, the Senior Note Indenture contains
certain restrictive covenants prohibiting the Company from (1) issuing,
assuming, guaranteeing or permitting to exist after the Release Date, so long as
any Senior Notes are outstanding, any secured debt without effectively securing
the Senior Notes equally and ratably with such secured debt, or (2) entering
into or permitting to exist certain sale/leaseback transactions, subject, in
each case, to certain exceptions described under "-- Certain Covenants of the
Company."
There is no provision in the Senior Note Indenture or the Senior Notes
that requires the Company to redeem, or permit the holders to cause a redemption
of, the Senior Notes or that otherwise protects the holders in the event that
the Company incurs substantial additional indebtedness, whether or not in
connection with a change in control of the Company.
Reference is made to a supplement to this prospectus for a description of
the following terms of the series of Senior Notes in respect of which this
prospectus is being delivered, to the extent such terms supplement or differ
from the description of the Senior Notes contained in this prospectus: (1) the
designation of such Senior Notes; (2) the aggregate principal amount of such
Senior Notes; (3) the price (expressed as a percentage of principal amount) at
which such Senior Notes will be issued; (4) the date or dates on which the
principal of such Senior Notes is payable; (5) the rate or rates at which such
Senior Notes will bear interest, or method of calculation of such rate or rates,
the date or dates from which such interest will accrue, the dates on which such
interest will be payable ("Interest Payment Dates"), and the regular record
dates for the
6
interest payable on such Interest Payment Dates ("Regular Record Dates"); (6)
the option, if any, of the Company to redeem such Senior Notes and the period or
periods within which, or the date or dates on which, the prices at which and the
terms and conditions upon which, such Senior Notes may be redeemed, in whole or
in part, upon the exercise of such option; (7) the obligation, if any, of the
Company to redeem or purchase such Senior Notes at the option of the registered
holder or pursuant to any sinking fund or analogous provisions and the period or
periods within which, or the date or dates on which, the price or prices at
which and the terms and conditions upon which, such Senior Notes will be
redeemed or purchased, in whole or in part, pursuant to such obligation; (8) if
prior to the Release Date, the designation of the related series of Senior Note
Mortgage Bonds being delivered to the Senior Note Trustee in connection with the
issuance of such Senior Notes; and (9) any other terms of such Senior Notes not
inconsistent with the Senior Note Indenture.
Unless otherwise indicated in a supplement to this prospectus, the Senior
Notes will be issued (1) in denominations of $1,000 and integral multiples
thereof, and (2) in book-entry only form and represented by one or more Global
Securities, as described under "-- Book-Entry Senior Notes."
Payment of Principal and Interest
Until the Senior Notes are paid or payment thereof is provided for, the
Company will, at all times, maintain a paying agent (the "Paying Agent") in The
City of New York capable of performing the duties described herein to be
performed by the Paying Agent. The Company has initially appointed United States
Trust Company of New York, 114 West 47th Street, New York, New York 10036 as
Paying Agent. Any change in the Paying Agent or its address effected prior to
the issuance of any series of Senior Notes will be set forth in a supplement to
this prospectus. Thereafter, the Company will notify the holders of the Senior
Notes in accordance with the Senior Note Indenture of any change in the Paying
Agent or its address.
Each series of Senior Notes will bear interest from the later of (1) the
date such series is issued and authenticated (the "Original Issue Date") or the
date specified in such series or (2) the most recent date to which interest has
been paid or duly provided for with respect to such series, in each case at the
rate set forth in a supplement to this prospectus, until the principal amount
thereof is paid or made available for payment. Interest on each series of Senior
Notes will be payable on such Interest Payment Dates as are set forth in a
supplement to this prospectus and at maturity or upon earlier redemption;
provided, however, that the first Interest Payment Date for any series of Senior
Notes with an Original Issue Date between a Regular Record Date set forth in a
supplement to this prospectus and an Interest Payment Date will be the Interest
Payment Date following the next Regular Record Date. Each payment of interest in
respect of an Interest Payment Date will include interest accrued to but
excluding such Interest Payment Date. Interest will be computed on the basis of
a 360-day
7
year of twelve 30-day months (and for any partial periods shall be computed on
the basis of the number of days elapsed in a 360-day year of twelve 30-day
months).
Interest payable on any Interest Payment Date will be paid to the person
in whose name a Senior Note is registered at the close of business on the Record
Date next preceding such Interest Payment Date; provided, however, that interest
payable at maturity or upon earlier redemption will be payable to the person to
whom principal shall be payable.
Any payment required to be made in respect of a Senior Note on a date that
is not a Business Day need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on such date,
and no additional interest shall accrue as a result of such delayed payment.
"Business Day" shall mean each day that is not a day on which banking
institutions or trust companies in the Borough of Manhattan, the City and State
of New York, or in the city where the corporate trust office of the Senior Note
Trustee is located, are obligated or authorized by law or executive order to
close.
Principal of, premium, if any, and interest on any series of Senior Notes
represented by Global Securities will be paid in the manner described under
"--Book-Entry Senior Notes."
Redemption Provisions
Except as shall otherwise be provided in a supplement to this prospectus,
each series of Senior Notes will be redeemable, as a whole or in part, at the
Company's option, at any time or from time to time, prior to the maturity of
such series, on at least 30 days, but not more than 60 days, prior notice mailed
to the registered address of each holder of the such series.
The redemption prices will be equal to the greater of (1) 100% of the
principal amount of the series of Senior Notes to be redeemed or (2) as
determined by an Independent Investment Banker (as defined below), the sum of
the present values of the Remaining Scheduled Payments (as defined below)
discounted (for purposes of determining such present value), on a semi-annual
basis (assuming a 360-day year consisting of twelve 30-day months), at a
discount rate equal to the sum of the Treasury Rate (as defined below) and a
number of basis points to be set forth in a supplement to this prospectus.
In each case, accrued interest on such series of Senior Notes to be
redeemed will be payable to the redemption date.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
8
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the series of Senior Notes to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such series. "Independent Investment Banker"
means one of the Reference Treasury Dealers appointed by the Company.
"Comparable Treasury Price" means, with respect to any redemption date,
(1) the average of the Reference Treasury Dealer Quotations for such redemption
date after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (2) if the Senior Note Trustee obtains fewer than four such
Reference Treasury Dealer Quotations, the average of all such Reference Treasury
Dealer Quotations. "Reference Treasury Dealer Quotations" means, with respect to
each Reference Treasury Dealer and any redemption date, the average, as
determined by the Senior Note Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Senior Note Trustee by such Reference
Treasury Dealer at 3:30 p.m., New York City time, on the third Business Day
preceding such redemption date.
"Reference Treasury Dealer" means such nationally recognized investment
banking firms that are primary U.S. Government securities dealers as are set
forth in a supplement to this prospectus.
"Remaining Scheduled Payments" means, with respect to each series of
Senior Note to be redeemed, the remaining scheduled payments of principal of and
interest on such series that would be due after the related redemption date but
for such redemption. If such redemption date is not an Interest Payment Date
with respect to such series, the amount of the next succeeding scheduled
interest payment on such series will be reduced by the amount of interest
accrued on such series to such redemption date.
On and after the redemption date, interest will cease to accrue on the
series of Senior Notes or any portion of thereof called for redemption (unless
the Company does not deposit the money for the payment of the redemption price
and accrued interest pursuant to the next succeeding paragraph). If less than
all the Senior Notes of any series are to be redeemed, the Senior Notes of such
series to be redeemed shall be selected by the Senior Note Trustee by such
method as it shall deem fair and appropriate.
Any notice of redemption at the option of the Company may state that such
redemption will be conditional upon receipt by the Senior Note Trustee (or a
Paying Agent), on or prior to the date fixed for such redemption, of money
sufficient to pay the principal of and premium, if any, and interest on such
series of Senior Notes and that if such money has not been so received, such
notice will be of no force and effect and the Company will not be required to
redeem such series of Senior Notes.
9
Except as shall otherwise be provided in a supplement to this prospectus,
the Senior Notes will not be subject to a sinking fund.
The Company may at any time purchase Senior Notes at any price in the open
market or otherwise. Senior Notes so purchased by the Company may be surrendered
to the Senior Note Trustee for cancellation.
Security; Release Date
Until the Release Date, the Senior Notes will be secured by one or more
series of the Company's first mortgage bonds (the "Senior Note Mortgage Bonds")
issued and delivered by the Company to the Senior Note Trustee (see "Description
of Senior Note Mortgage Bonds"). Upon the issuance of a series of Senior Notes
prior to the Release Date, the Company will simultaneously issue and deliver to
the Senior Note Trustee, as security for all the Senior Notes being issued, a
series of Senior Note Mortgage Bonds that will have the same stated maturity
date and corresponding redemption provisions, and will be in the same aggregate
principal amount and have the same interest rate as the corresponding series of
Senior Notes being issued. Any payment by the Company to the Senior Note Trustee
of principal of, premium, if any, and interest on, a series of Senior Note
Mortgage Bonds will be applied by the Senior Note Trustee to satisfy the
Company's obligations with respect to principal of, premium, if any, and
interest on, the related series of Senior Notes.
The Release Date will be the earlier of (1) the date that all First
Mortgage Bonds (as defined herein), other than the Senior Note Mortgage Bonds,
have been retired (whether at, before or after the maturity thereof) through
payment, redemption, purchase, defeasance or otherwise and (2) the date upon
which the Senior Note Trustee holds Senior Note Mortgage Bonds constituting not
less than 80% in aggregate principal amount of all outstanding First Mortgage
Bonds. On the Release Date, the Senior Note Trustee will deliver to the Company
for cancellation all Senior Note Mortgage Bonds and, not later than 30 days
thereafter, will provide notice to all holders of the Senior Notes of the
occurrence of the Release Date. As a result, on the Release Date, the Senior
Note Mortgage Bonds shall cease to secure the Senior Notes and the Senior Notes
will become unsecured and unsubordinated general obligations of the Company.
Each series of Senior Note Mortgage Bonds will be a series of First
Mortgage Bonds of the Company, all of which are secured by a first lien on
substantially all of the Company's property. See "Description of Senior Note
Mortgage Bonds - Kind and Priority of Lien." Upon the payment or cancellation of
any outstanding Senior Notes, the Senior Note Trustee shall surrender to the
Company for cancellation an equal principal amount of the related series of
Senior Note Mortgage Bonds. The Company shall not permit, at any time prior to
the Release Date, the aggregate principal amount of Senior Note Mortgage Bonds
held by the Senior Note Trustee to be less than the aggregate principal amount
of the Senior Notes then outstanding. After the issuance of the first series of
Senior Notes under the Senior Note Indenture, no
10
additional First Mortgage Bonds will be issued by the Company under the Mortgage
(as defined herein) other than as collateral security for the Senior Notes.
Events of Default
The following constitute events of default under the Senior Note
Indenture: (a) default in the payment of principal of or premium, if any, on any
Senior Note when due and payable; (b) default in the payment of interest on any
Senior Note when due and payable which continues for 60 days; (c) default in the
performance or breach of any other covenant or agreement of the Company in the
Senior Notes or in the Senior Note Indenture and the continuation thereof for 90
days after written notice thereof to the Company by the Senior Note Trustee or
the holders of at least 33% in aggregate principal amount of the outstanding
Senior Notes; (d) prior to the Release Date, the occurrence of a "completed
default" as defined under the Mortgage; provided, however, that the waiver or
cure of such default and the recision and annulment of the consequences thereof
under the Mortgage shall constitute a waiver of the corresponding event of
default under the Senior Note Indenture and a recision and annulment of the
consequences thereof under the Senior Note Indenture; and (e) certain events of
bankruptcy, insolvency, reorganization, assignment or receivership of the
Company.
If an event of default under the Senior Note Indenture occurs and is
continuing, either the Senior Note Trustee or the holders of a majority in
aggregate principal amount of the outstanding Senior Notes may declare, by
notice in writing, the principal of and interest on all Senior Notes to be due
and payable immediately. Upon such acceleration of the Senior Notes, the Senior
Note Mortgage Bonds shall be immediately redeemable upon demand of the Senior
Note Trustee (and surrender thereof to the Mortgage Trustee, as herein defined)
at a redemption price of 100% of the principal amount thereof, together with
interest to the redemption date. See "Description of Senior Note Mortgage Bonds
Redemption Provisions of Senior Note Mortgage Bonds." At any time after an
acceleration of the Senior Notes has been obtained (and provided the
acceleration of all Senior Note Mortgage Bonds has not occurred), if the Company
pays or deposits with the Senior Note Trustee a sum sufficient to pay all
matured installments of interest and the principal and any premium which has
become due on the Senior Notes otherwise than by acceleration and all defaults
shall have been cured or waived, then such payment or deposit will cause an
automatic rescission and annulment of the acceleration of the Senior Notes.
The Senior Note Indenture provides that the Senior Note Trustee generally
will be under no obligation to exercise any of its rights or powers under the
Senior Note Indenture at the request or direction of any of the holders of the
Senior Notes unless such holders have offered to the Senior Note Trustee
reasonable security or indemnity. Subject to such provisions for indemnity and
certain other limitations contained in the Senior Note Indenture, the holders of
a majority in aggregate principal amount of the outstanding Senior Notes
generally will have the
11
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Senior Note Trustee, or of exercising any trust or power
conferred on the Senior Note Trustee. The holders of a majority in aggregate
principal amount of the outstanding Senior Notes generally will have the right
to waive any past default or event of default (other than a payment default) on
behalf of all holders of the Senior Notes. The Senior Note Indenture provides
that no holder of the Senior Notes may institute any action against the Company
under the Senior Note Indenture unless such holder previously shall have given
to the Senior Note Trustee written notice of an event of default and continuance
thereof and unless the holders of a majority in aggregate principal amount of
the Senior Notes then outstanding affected by such event of default shall have
requested the Senior Note Trustee to institute such action and shall have
offered the Senior Note Trustee reasonable indemnity, and the Senior Note
Trustee shall not have instituted such action within 60 days of such request.
Furthermore, no holder of the Senior Notes will be entitled to institute any
such action if and to the extent that such action would disturb or prejudice the
rights of other holders of the Senior Notes. Notwithstanding that the right of a
holder of the Senior Notes to institute a proceeding with respect to the Senior
Note Indenture is subject to certain conditions precedent, each holder of a
Senior Note has the right, which is absolute and unconditional, to receive
payment of the principal of, and premium, if any, and interest on such Senior
Note when due and to institute suit for the enforcement of any such payment, and
such rights may not be impaired without the consent of such holders of Senior
Notes. The Senior Note Indenture provides that the Senior Note Trustee, within
90 days after the occurrence of a default with respect to the Senior Notes, is
required to give holders of the Senior Notes notice of any default known to the
Senior Note Trustee, unless cured or waived, but, except in the case of default
in the payment of principal of, or premium, if any, or interest on, any Senior
Notes, the Senior Note Trustee may withhold such notice if it determines in good
faith that it is in the interest of such holders to do so. The Company is
required to deliver to the Senior Note Trustee each year an officer's
certificate as to whether or not the Company is in compliance with the
conditions and covenants under the Senior Note Indenture.
Book-Entry Senior Notes
Except as shall otherwise be provided in a supplement to this prospectus,
the Senior Notes will be issued in book-entry only form (each Senior Note so
issued, a "Book-Entry Senior Note"), and will be represented by one or more
registered Global Securities (each, a "Global Security") that will be deposited
with, or on behalf of, The Depository Trust Company, New York, New York ("DTC")
or such other Depository which may replace DTC as Depository for the Book-Entry
Senior Notes (the "Depository"), and registered in the name of a nominee of the
Depository.
Upon issuance, all Book-Entry Senior Notes of the same series will be
represented by one Global Security. Except under the circumstances described
below, Book-Entry Senior Notes will not be
12
exchangeable for Senior Notes in certificated form and will not otherwise be
issuable in certificated form.
If the Depository notifies the Company that it is at any time unwilling or
unable to continue as Depository and a successor Depository is not appointed
within 90 days after receipt of such notice, the Company will cause to be issued
Senior Notes in certificated form ("Certificated Senior Notes") in exchange for
the Global Security or Global Securities representing the corresponding
Book-Entry Senior Notes. In addition, the Company may at any time and in its
sole discretion determine not to have any Book-Entry Senior Notes represented by
one or more Global Securities and, in such event, will cause to be issued
individual Certificated Senior Notes in exchange for the Global Security or
Global Securities representing the corresponding Book-Entry Senior Notes.
Lastly, within seven days of the occurrence of an event of default under the
Senior Note Indenture, the Company will cause to be issued Certificated Senior
Notes in exchange for the Global Security or Securities representing the
corresponding Book-Entry Senior Notes. In any such instance, a beneficial owner
of a Book-Entry Senior Note represented by a Global Security will be entitled to
physical delivery of Certificated Senior Notes equal in principal amount to such
Book-Entry Senior Note and to have such Certificated Senior Notes registered in
its name.
The following is based on information furnished by DTC:
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934 (the "Exchange Act"). DTC holds
securities that its participants ("Direct Participants") deposit with DTC.
DTC also facilitates the settlement among Direct Participants of
securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement
of securities certificates. Direct Participants include securities brokers
and dealers, banks, trust companies, clearing corporations, and certain
other organizations. DTC is owned by a number of its Direct Participants
and by the New York Stock Exchange, Inc., the American Stock Exchange,
Inc., and the National Association of Securities Dealers, Inc. Access to
the DTC system is also available to others such as securities brokers and
dealers, banks, and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants and, together with Direct Participants,
the "Participants"). The rules applicable to DTC and its Participants are
on file with the Securities and Exchange Commission.
Purchases of Book-Entry Senior Notes represented by Global
Securities under the DTC system must be made by or
13
through Direct Participants, which will receive a credit for such
purchases of Book-Entry Senior Notes on DTC's records. The ownership
interest of each actual purchaser of each Book-Entry Senior Note
represented by a Global Security ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchase,
but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of
their holdings, from the Direct or Indirect Participant through which the
Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Book-Entry Senior Notes represented by Global Securities
are to be accomplished by entries made on the books of Participants acting
on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Book-Entry Senior
Notes represented by Global Securities, except in the event that use of
the book-entry system for such Book-Entry Senior Notes is discontinued.
To facilitate subsequent transfers, all Global Securities deposited
with, or on behalf of, DTC are registered in the name of DTC's partnership
nominee, Cede & Co. The deposit of Global Securities with DTC and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the
Book-Entry Senior Notes represented by Global Securities; DTC's records
reflect only the identity of the Direct Participants to whose accounts
such Book-Entry Senior Notes are credited which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of
the Book-Entry Senior Notes having the same Original Issue Date and other
terms are being redeemed, DTC's practice is to determine by lot the amount
of the interest of each Direct Participant to be so redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Book-Entry Senior Notes represented by Global Securities. Under its usual
procedures, DTC mails an Omnibus Proxy to the Company as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting
or voting rights to those Direct Participants to whose accounts the
Book-Entry Senior Notes represented by Global Securities are credited on
the applicable record date (identified in a listing attached to the
Omnibus Proxy).
14
Principal and any premium and/or interest payments on the Book-Entry
Senior Notes represented by Global Securities will be made to DTC in
immediately available funds. DTC's practice is to credit Direct
Participants' accounts on the date on which interest is payable in
accordance with the respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payment on such date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held
for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such Participant and not of DTC,
the underwriters, dealers or agents or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to
time. Payment of principal and any premium and/or interest to DTC is the
responsibility of the Company and the Senior Note Trustee. Disbursement of
such payments to Direct Participants shall be the responsibility of DTC,
and disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities Depository
with respect to the Book-Entry Senior Notes at any time by giving
reasonable notice to the Company and the Senior Note Trustee. Under such
circumstances, in the event that a successor securities Depository is not
obtained, Senior Notes in certificated form are required to be printed and
delivered in exchange for Book-Entry Senior Notes held by DTC.
The Company may decide to discontinue use of the system and
book-entry transfers through DTC (or a successor securities Depository).
In that event, Senior Notes in certificated form will be printed and
delivered in exchange for Book-Entry Senior Notes held by DTC.
So long as Cede & Co. is the registered owner of any series of
Book-Entry Senior Notes, as nominee of DTC, reference herein to holders of
such series of Book-Entry Senior Notes shall mean Cede & Co. or DTC and
shall not mean the Beneficial Owners of the Book-Entry Senior Notes.
Management of DTC is aware that some computer applications, systems
and the like for processing data ("Systems") that are dependent upon
calendar dates, including dates before, on, and after January 1, 2000, may
encounter "Year 2000 problems." DTC has informed Direct Participants and
Indirect Participants and other members of the financial community (the
"Industry") that it has developed and is implementing a program so that
its Systems, as the same relate to the timely payment of distributions
(including principal and interest payments) to securityholders, book-entry
deliveries, and settlement of trades within DTC, continue to function
appropriately. This program includes a technical assessment and a
remediation plan, each of which is complete. Additionally, DTC's plan
includes a testing phase, which is expected to be completed within
appropriate time frames.
15
However, DTC's ability to perform properly its services is also
dependent upon other parties, including, but not limited to, issuers and
their agents, as well as DTC's Direct Participants and Indirect
Participants, third party vendors from whom DTC licenses software and
hardware, and third party vendors on whom DTC relies for information or
the provision of services, including telecommunication and electrical
utility service providers, among others. DTC has informed the Industry
that it is contacting (and will continue to contact) third party vendors
from whom DTC acquires services to: (1) impress upon them the importance
of such services being Year 2000 compliant; and (2) determine the extent
of their efforts for Year 2000 remediation (and, as appropriate, testing)
of their services. In addition, DTC is in the process of developing such
contingency plans as it deems appropriate.
According to DTC, the information in the preceding two paragraphs
with respect to DTC has been provided to the Industry for informational
purposes only and is not intended to serve as a representation, warranty,
or contract modification of any kind.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources (including DTC) that the Company believes to be
reliable, but the Company takes no responsibility for the accuracy thereof.
The underwriters, dealers or agents of any Senior Notes may be Direct
Participants of DTC.
None of the Company, the Senior Note Trustee, any underwriters, agents or
dealers or any agent for payment on or registration of transfer or exchange of
any Global Security will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial interests in
such Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
Modification with Consent of Holders
Modification and amendment of the Senior Note Indenture may be effected by
the Company and the Senior Note Trustee with the consent of the holders of a
majority in aggregate principal amount of the outstanding Senior Notes affected
thereby, provided that no such modification or amendment may, without the
consent of the holder of each outstanding Senior Note affected thereby, (a)
change the maturity date of any Senior Note; (b) reduce the rate (or change the
method of calculation thereof) or extend the time of payment of interest on any
Senior Note; (c) reduce the principal amount of, or premium payable on, any
Senior Note; (d) change the coin or currency of any payment of principal of, or
premium, if any, or interest on, any Senior Note; (e) change the date on which
any Senior Note may be redeemed or repaid at the option of the holder thereof or
adversely affect the rights of a holder to institute suit for the enforcement of
any payment on or with respect to any Senior Note; (f) impair the interest of
the Senior Note Trustee in the Senior Note Mortgage Bonds held by it
16
or, prior to the Release Date, reduce the principal amount of any series of
Senior Note Mortgage Bonds securing the Senior Notes to an amount less than the
principal amount of the related series of Senior Notes or alter the payment
provisions of such Senior Note Mortgage Bonds in a manner adverse to the holders
of the Senior Notes; or (g) modify the foregoing requirements or reduce the
percentage of outstanding Senior Notes necessary to modify or amend the Senior
Note Indenture or to waive any past default to less than a majority.
Modification without Consent of Holders
Modification and amendment of the Senior Note Indenture may be effected by
the Company and the Senior Note Trustee without the consent of the holders (a)
to add to the covenants of the Company for the benefit of the holders or to
surrender a right conferred on the Company in the Senior Note Indenture; (b) to
add further security for the Senior Notes; (c) to supply omissions, cure
ambiguities or correct defects, which actions, in each case, are not prejudicial
to the interest of the holders in any material respect; or (d) to make any other
change that is not prejudicial to the holders of the Senior Notes in any
material respect.
A supplemental indenture which changes or eliminates any covenants or
other provision of the Senior Note Indenture (or any supplemental indenture)
which has expressly been included solely for the benefit of one or more series
of the Senior Notes, or which modifies the rights of the holders of the Senior
Notes of such series with respect to such covenant or provision, will be deemed
not to affect the rights under the Senior Note Indenture of the holders of the
Senior Notes of any other series.
Defeasance and Discharge
The Senior Note Indenture provides that the Company will be discharged
from any and all obligations in respect to the Senior Notes and the Senior Note
Indenture (except for certain obligations such as obligations to register the
transfer or exchange of the Senior Notes, replace stolen, lost or mutilated
Senior Notes and maintain paying agencies) if, among other things, the Company
irrevocably deposits with the Senior Note Trustee, in trust for the benefit of
the holders of Senior Notes, money or certain United States government
obligations, or any combination thereof, which will provide money in an amount
sufficient, without reinvestment, to make all payments of principal of, premium,
if any, and interest on, the Senior Notes on the dates such payments are due in
accordance with the terms of the Senior Note Indenture and the Senior Notes;
provided that unless all of the Senior Notes mature within 90 days of such
deposit by redemption or otherwise, the Company shall also have delivered to the
Senior Note Trustee an opinion of counsel to the effect that the Company has
received from, or there has been published by, the Internal Revenue Service or
that there has been a change of law (collectively, an "External Tax
Pronouncement"), in either case to the effect that the holders of the Senior
Notes will not recognize income, gain or loss for federal income tax
17
purposes as a result of such defeasance or discharge of the Senior Note
Indenture. Thereafter, the holders of the Senior Notes may look only to such
deposit for payment of the principal of, and interest and any premium on, the
Senior Notes.
If the Company makes the deposit of cash or certain United States
government obligations referred to above with respect to one or more series of
Senior Notes, and otherwise complies with the requirements of the Senior Note
Indenture (except that the opinion of counsel referred to above need not be
based upon an External Tax Pronouncement), then the Company shall be released
with respect to such series of Senior Notes from its obligations described under
"-- Certain Covenants of the Company -- Limitation on Liens" and "-- Limitation
of Sale and Lease-Back Transactions" and "-- Consolidation, Merger and Sale or
Disposition of Assets."
Consolidation, Merger and Sale or Disposition of Assets
The Company may not consolidate with or merge into any other corporation
or sell or otherwise dispose of its properties as or substantially as an
entirety to any person unless (1) the successor or transferee corporation or the
person that receives such properties pursuant to such sale, transfer or other
disposition shall be a corporation organized and existing under the laws of the
United States or any state thereof or the District of Columbia, (2) the
successor or transferee corporation or the person that receives such properties
pursuant to such sale, transfer or other disposition assumes by supplemental
indenture the due and punctual payment of the principal of and premium, if any,
and interest on all the Senior Notes and the performance of every covenant of
the Senior Note Indenture to be performed or observed by the Company; and (3) if
prior to the Release Date, the successor or transferee corporation or the person
that receives such properties pursuant to such sale, transfer or other
disposition assumes the Company's obligations under the Mortgage with respect to
the Senior Note Mortgage Bonds. Upon any such consolidation, merger, sale,
transfer or other disposition of the properties of the Company substantially as
an entirety, the successor corporation formed by such consolidation or into
which the Company is merged or the person to which such sale, transfer or other
disposition is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Senior Note Indenture with the
same effect as if such successor corporation or person had been named as the
Company therein, and the Company will be released from all obligations under the
Senior Note Indenture. For purposes of the Senior Note Indenture, the conveyance
or other transfer by the Company of (1) all or any portion of its facilities for
the generation of electric energy or (2) all of its facilities for the
transmission of electric energy, in each case considered alone or in any
combination with properties described in the other clause, shall in no event be
deemed to constitute a conveyance or other transfer of all the properties of the
Company, as or substantially as an entirety.
18
Certain Covenants of the Company
Limitation on Liens
The Senior Note Indenture provides that, so long as any such Senior Notes
are outstanding, the Company may not issue, assume, guarantee or permit to exist
after the Release Date any Debt (as defined below) that is secured by any
mortgage, security interest, pledge or lien ("Lien") of or upon any Operating
Property (as defined below) of the Company, whether owned at the date of the
Senior Note Indenture or thereafter acquired, without in any such case
effectively securing the Senior Notes (together with, if the Company shall so
determine, any other indebtedness of the Company ranking equally with the Senior
Notes) equally and ratably with such Debt (but only so long as such Debt is so
secured).
The foregoing restriction will not apply to: (1) Liens on any Operating
Property existing at the time of its acquisition (which Liens may also extend to
subsequent repairs, alterations and improvements to such Operating Property);
(2) Liens on Operating Property of an entity existing at the time such entity is
merged into or consolidated with, or such entity disposes of its properties (or
those of a division) as or substantially as an entirety to, the Company; (3)
Liens on Operating Property to secure the cost of acquisition, construction,
development or substantial repair, alteration or improvement of property or to
secure any Debt incurred to provide funds for any such purpose or for
reimbursement of funds previously expended for any such purpose, provided such
Liens are created or assumed contemporaneously with, or within 18 months after,
such acquisition or the completion of substantial repair or alteration,
construction, development or substantial improvement; (4) Liens in favor of any
state or any department, agency or instrumentality or political subdivision of
any state, or for the benefit of holders of securities issued by any such entity
(or providers of credit enhancement with respect to such securities), to secure
any Debt (including, without limitation, obligations of the Company with respect
to industrial development, pollution control or similar revenue bonds) incurred
for the purpose of financing all or any part of the purchase price or the cost
of substantially repairing or altering, constructing, developing or
substantially improving Operating Property of the Company; (5) Liens under the
Mortgage permitted by the Senior Note Indenture; (6) Liens to secure payment of
compensation to the Senior Note Trustee as provided in the Senior Note
Indenture; (7) any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any Lien referred to in
clauses (1) through (6), provided, however, that the principal amount of Debt
secured thereby and not otherwise authorized by said clauses (1) to (6),
inclusive, shall not exceed the principal amount of Debt, plus any premium or
fee payable in connection with any such extension, renewal or replacement, so
secured at the time of such extension, renewal or replacement. However, the
foregoing restrictions will not apply to the issuance, assumption or guarantee
by the Company of Debt
19
secured by a Lien which would otherwise be subject to the foregoing restrictions
up to an aggregate amount which, together with all other secured Debt of the
Company (not including secured Debt permitted under any of the foregoing
exceptions) and the Value (as defined below) of Sale and Lease-Back Transactions
(as defined below) existing at such time (other than Sale and Lease-Back
Transactions the proceeds of which have been applied to the retirement of
certain indebtedness, Sale and Lease-Back Transactions in which the property
involved would have been permitted to be subjected to a Lien under any of the
foregoing exceptions in clauses (1) to (7) and Sale and Lease-Back Transactions
that are permitted by the first sentence of "--Limitations on Sale and
Lease-Back Transactions" below), does not exceed the greater of 15% of Tangible
Assets and 15% of Capitalization (as such terms are defined below).
Limitation on Sale and Lease-Back Transactions
The Senior Note Indenture provides that so long as any Senior Notes are
outstanding, the Company may not enter into or permit to exist after the Release
Date any Sale and Lease-Back Transaction with respect to any Operating Property
(except for transactions involving leases for a term, including renewals, of not
more than 48 months), if the purchasers' commitment is obtained more than 18
months after the later of the completion of the acquisition, construction or
development of such Operating Property or the placing in operation of such
Operating Property or of such Operating Property as constructed or developed or
substantially repaired, altered or improved. This restriction will not apply if
(a) the Company would be entitled pursuant to any of the provisions described in
clauses (1) to (7) of the first sentence of the second paragraph under
"--Limitation on Liens" above to issue, assume, guarantee or permit to exist
Debt secured by a Lien on such Operating Property without equally and ratably
securing the Senior Notes, (b) after giving effect to such Sale and Lease-Back
Transaction, the Company could incur pursuant to the provisions described in the
second sentence of the second paragraph under "--Limitation on Liens", at least
$1.00 of additional Debt secured by Liens (other than Liens permitted by clause
(a)), or (c) the Company applies within 180 days an amount equal to, in the case
of a sale or transfer for cash, the net proceeds (not exceeding the net book
value), and, otherwise, an amount equal to the fair value (as determined by its
Board of Directors) of the Operating Property so leased, to the retirement of
Senior Notes or other Debt of the Company ranking equally with the Senior Notes,
subject to reduction for Senior Notes and such Debt retired during such 180-day
period otherwise than pursuant to mandatory sinking fund or prepayment
provisions and payments at stated maturity.
Certain Definitions
"Capitalization" means the total of all the following items appearing on,
or included in, the consolidated balance sheet of the Company: (1) liabilities
for Debt maturing more than 12 months from the date of determination; and (2)
common stock, preferred stock, Hybrid Preferred Securities (as defined in the
Senior Note Indenture), premium on capital stock, capital
20
surplus, capital in excess of par value and retained earnings (however the
foregoing may be designated), less, to the extent not otherwise deducted, the
cost of shares of capital stock reacquired by the Company. Subject to the
foregoing, "Capitalization" shall be determined in accordance with generally
accepted accounting principles ("GAAP") and practices applicable to the type of
business in which the Company is engaged and that are approved by independent
accountants regularly retained by the Company, and may be determined as of a
date not more than 60 days prior to the happening of an event for which such
determination is being made.
"Debt" means any outstanding debt of the Company for money borrowed
evidenced by notes, debentures, bonds or other securities, or guarantees of any
thereof.
"Operating Property" means (1) any interest in real property owned by the
Company and (2) any asset owned by the Company that is depreciable in accordance
with GAAP excluding, in either case, any interest of the Company as lessee under
any lease (except for a lease that results from a Sale and Lease-Back
Transaction) which has been or would be capitalized on the books of the lessee
in accordance with GAAP.
"Sale and Lease-Back Transaction" means any arrangement with any person
providing for the leasing to the Company of any Operating Property (except for
leases for a term, including any renewals thereof, of not more than 48 months),
which Operating Property has been or is to be sold or transferred by the Company
to such person; provided, however, Sale and Lease-Back Transaction does not
include any arrangement first entered into prior to the date of the Senior Note
Indenture.
"Tangible Assets" means the amount shown as total assets on the
consolidated balance sheet of the Company, less the following: (1) intangible
assets including, but without limitation, such items as goodwill, trademarks,
trade names, patents, and unamortized debt discount and expense, and (2)
appropriate adjustments, if any, on account of minority interests. Tangible
Assets shall be determined in accordance with GAAP and practices applicable to
the type of business in which the Company is engaged and that are approved by
the independent accountants that are regularly retained by the Company, and may
be determined as of a date not more than 60 days prior to the happening of the
event for which such determination is being made.
"Value" means, with respect to a Sale and Lease-Back Transaction, as of
any particular time, the amount equal to the greater of (1) the net proceeds to
the Company from the sale or transfer of the property leased pursuant to such
Sale and Lease-Back Transaction, and (2) the net book value of such property, as
determined by the Company in accordance with GAAP, in either case multiplied by
a fraction, the numerator of which shall be equal to the number of full years of
the term of the lease that is part of such Sale and Lease-Back Transaction
remaining at the time of determination and the denominator of which shall be
equal to the number of full years of such term, without regard, in any case,
21
to any renewal or extension options contained in such lease.
Voting of Senior Note Mortgage Bonds Held by Senior Note Trustee
The Senior Note Trustee, as the holder of Senior Note Mortgage Bonds, will
attend any meeting of bondholders under the Mortgage, or, at its option, will
deliver its proxy in connection therewith relating to matters with respect to
which it is entitled to vote or consent.
The Senior Note Trustee shall vote all Senior Note Mortgage Bonds then
held by it or consent with respect thereto, proportionately with the vote or
consent of the holders of all other First Mortgage Bonds outstanding under the
Mortgage, the holders of which are eligible to vote or consent; provided,
however, that the Senior Note Trustee shall not so vote in favor of, or so
consent to, any amendment or modification of the Mortgage which, if it were an
amendment or modification of the Senior Note Indenture, would require the
consent of the holders of Senior Notes as described under "-- Modification With
Consent of Holders," without the prior consent of holders of Senior Notes which
would be required for such an amendment or modification of the Senior Note
Indenture.
Resignation or Removal of Senior Note Trustee
The Senior Note Trustee may resign at any time upon written notice to the
Company specifying the day upon which the resignation is to take effect and such
resignation will take effect immediately upon the later of the appointment of a
successor Senior Note Trustee and such specified day.
The Senior Note Trustee may be removed at any time by an instrument or
concurrent instruments in writing filed with the Senior Note Trustee and signed
by the holders, or their attorneys-in-fact, of at least a majority in aggregate
principal amount of the then outstanding Senior Notes. In addition, so long as
no event of default under the Senior Note Indenture or event which, with the
giving of notice or lapse of time or both, would become an event of default has
occurred and is continuing, the Company may remove the Senior Note Trustee upon
written notice to the holder of each Senior Note outstanding and the Senior Note
Trustee, and appointment of a successor Senior Note Trustee.
Concerning the Senior Note Trustee
The United States Trust Company of New York is the Senior Note Trustee
under the Senior Note Indenture and the Mortgage Trustee under the Mortgage. The
Senior Note Indenture provides that the Company's obligations to compensate the
Senior Note Trustee and reimburse the Senior Note Trustee for expenses,
disbursements and advances will constitute indebtedness which will be secured by
a lien generally prior to that of the Senior Notes upon all property and funds
held or collected by the Senior Note Trustee as such. The Senior Note Indenture
provides that the Senior Note Trustee shall be subject to and shall comply with
the provisions of Section 310(b) of the Trust Indenture Act of 1939, as amended,
and that nothing in the Senior Note Indenture
22
shall be deemed to prohibit the Senior Note Trustee or the Company from making
any application permitted pursuant to such section.
Governing Law
The Senior Note Indenture and each Senior Note will be governed by New
York law.
DESCRIPTION OF SENIOR NOTE MORTGAGE BONDS
General
Each series of Senior Note Mortgage Bonds will be a series of first
mortgage bonds (the "First Mortgage Bonds") to be issued under and secured by
the Company's Indenture dated as of March 1, 1946 between the Company and United
States Trust Company of New York, as successor trustee (the "Mortgage Trustee"),
as heretofore amended and supplemented, and to be further amended and
supplemented by one or more Supplemental Indentures with respect to the Senior
Note Mortgage Bonds (collectively, the "Mortgage"). The statements herein
concerning the First Mortgage Bonds and the Mortgage are summaries and do not
purport to be complete. They may make use of defined terms and are subject to,
and qualified in their entirety by, all of the provisions of the Mortgage, which
is incorporated herein by reference.
The Senior Note Mortgage Bonds will be issued as security for the
Company's obligations under the Senior Note Indenture and will be immediately
delivered to, and registered in the name of, the Senior Note Trustee. The Senior
Note Indenture provides that the Senior Note Trustee shall not transfer any
Senior Note Mortgage Bonds except (1) to a successor trustee, (2) to the Company
(as provided in the Senior Note Indenture) or (3) in compliance with a court
order in connection with a bankruptcy or reorganization proceeding of the
Company. The Senior Note Trustee shall generally vote the Senior Note Mortgage
Bonds proportionately with what it believes to be the vote of the holders of all
other First Mortgage Bonds then outstanding, as described under "Description of
Senior Notes - Voting of Senior Note Mortgage Bonds Held by Senior Note
Trustee."
The Senior Note Mortgage Bonds will correspond to the corresponding series
of Senior Notes in respect of principal amount, interest rate, maturity date and
redemption provisions. Upon payment of the principal of or premium, if any, or
interest on the Senior Notes, Senior Note Mortgage Bonds of the corresponding
series in a principal amount equal to the principal amount of such Senior Notes
will, to the extent of such payment of principal, premium or interest, be deemed
fully paid and the obligation of the Company to make such payment shall be
discharged.
At September 30, 1999, the Company had outstanding $1,173.5 million in
principal amount of First Mortgage Bonds issued under the Mortgage.
23
Redemption Provisions of Senior Note Mortgage Bonds
The Senior Note Mortgage Bonds will be redeemed on the respective dates
and in the respective principal amounts which correspond to the redemption dates
for, and the principal amounts to be redeemed of, the corresponding series of
Senior Notes. The Senior Note Mortgage Bonds are not redeemable by operation of
the improvement fund or the maintenance provisions of the Mortgage or with the
proceeds of released property.
In the event of an event of default under the Senior Note Indenture and
acceleration of the Senior Notes, the Senior Note Mortgage Bonds will be
immediately redeemable in whole, upon demand of the Senior Note Trustee (and
surrender thereof to the Mortgage Trustee), at a redemption price of 100% of the
principal amount thereof, together with accrued interest to the redemption date.
See "Description of Senior Notes - Events of Default."
Kind and Priority of Lien
The Senior Note Mortgage Bonds and all First Mortgage Bonds outstanding
under the Mortgage will be equally and ratably secured by a direct first lien on
substantially all of the Company's property (except certain real estate not
necessary or appropriate for the Company's business; cash, contracts, choses in
action and securities not specifically subjected to the lien of the Mortgage;
certain equipment not installed as fixed property; merchandise and supplies
acquired, and electricity or products generated or purchased for resale; and
materials and supplies held for consumption), subject to excepted encumbrances,
matters of minor nature and the lien of the Trustee for compensation,
indemnified losses and expenses. The Mortgage provides for subjecting similar
after-acquired property to the lien thereof subject to certain restrictions upon
the acquisition of property subject to outstanding prior lien bonds which are
effective so long as the First Mortgage Bonds are outstanding.
Release and Substitution of Property
Machinery, equipment, fixtures, appliances and other similar property
which is worn-out, obsolete or unnecessary for the operations of the Company may
be disposed of by the Company without a release by the Mortgage Trustee provided
that the Company replaces it with other property (not necessarily of the same
character) which is equal in value to the property so disposed of. Leases,
rights-of-way, franchises, licenses and permits may be abandoned, surrendered or
modified without a release by the Mortgage Trustee provided any changed or
substituted lease, right-of-way, franchise, license or permit is subject to the
lien of the Mortgage and any consideration received by the Company in connection
therewith must be deposited with the Mortgage Trustee. Such provisions do not
have a material effect on the Company's property. Mortgaged property, subject to
certain conditions, may be released upon substitution of cash or certain other
property of equivalent value and in certain other circumstances. Money received
by the Mortgage Trustee as the result of any release of
24
property may be withdrawn against, among other things, bondable value of
property additions and bonds previously issued and retired.
The Mortgage Trustee is required to report to bondholders within 90 days
after the release of property of a value of 10% or more of the principal amount
of then outstanding First Mortgage Bonds, and annually as to all other released
property.
Dividend Restrictions
The Mortgage restricts common stock dividends payable by the Company to
the amount of the Company's accumulated earned surplus less $1,729,154. The
amount available for declaration and payment of dividends on the Company's
common stock pursuant to this restriction will be contained in a supplement to
this prospectus.
Issuance of Additional First Mortgage Bonds
So long as the Company is not in default in the performance of any
covenant to be performed by it under the Mortgage and obtains all requisite
authorizations of governmental bodies, it may issue additional First Mortgage
Bonds to the extent of any one or more of the following: (1) 60% of the bondable
value of property additions; (2) the amount of refundable prior lien bonds
theretofore or then retired or deposited with the Mortgage Trustee, as provided
in the Mortgage; (3) the aggregate principal amount of certain bonds theretofore
or then retired; or (4) the amount of cash deposited with the Mortgage Trustee
against the issuance of First Mortgage Bonds.
First Mortgage Bonds may be issued pursuant to (1) and (4) above (and
pursuant to (2) and (3) above unless the interest charges on the retired
refundable prior lien bonds or retired First Mortgage Bonds to be the basis of
such issuance were included in a net earnings certificate previously furnished
to the Mortgage Trustee) only if, for any period of twelve consecutive months
out of the fifteen calendar months preceding the first day of the month
involving the issuance of additional First Mortgage Bonds, net earnings
available for interest shall be at least two times the annual interest
requirements on the First Mortgage Bonds and all prior lien bonds then and to be
outstanding. Net earnings available for interest generally consists of the
excess of gross operating revenues over operating expenses (other than income
taxes), including provision for depreciation equal to the greater of (1) the
book provision for depreciation or (2) the "minimum provision for depreciation"
as outlined below under "Maintenance Fund", plus or minus net non-operating
income or loss with non-operating income limited to 5% of operating income.
Moreover, the Company's charter contains provisions limiting the ratio of
securities evidencing funded indebtedness and unsecured indebtedness to total
capitalization.
The principal amount of additional First Mortgage Bonds issuable pursuant
to these provisions will be contained in a supplement to this prospectus.
25
Sinking and Improvement Fund
The supplemental indenture creating each series of First Mortgage Bonds
requires that, so long as any such First Mortgage Bonds are outstanding, the
Company will make annual sinking and improvement fund deposits equal to 1% of
the principal amount of First Mortgage Bonds (except First Mortgage Bonds issued
against retired First Mortgage Bonds) delivered by the Trustee prior to January
1 of the year of deposit. Deposits are to be made in cash, reduced by credits
elected by the Company for (1) 60% of bondable value of property additions and
(2) the principal amount of refundable prior lien bonds and certain bonds
previously issued and retired. Cash so deposited may be withdrawn upon the same
basis that a credit may be taken as set forth in the preceding sentence, or may
be applied to the payment, purchase or redemption of First Mortgage Bonds. The
Company met the 1998 sinking fund requirement through the application of
property additions. "Bondable value of property additions" means essentially (a)
the net difference between (1) the lesser of the cost or fair value to the
Company of property additions since January 1, 1946 and (2) all retirements of
property then or thereafter owned, taken at the lesser of original cost or fair
value, as certified to the Mortgage Trustee as property additions, or the
"minimum provision for depreciation", whichever is greater, after credit for
cash substituted for any such retired property, less (b) 10/6ths of the amount
of prior lien bonds having become refundable prior lien bonds and less (c) the
amount of the bondable value of property additions previously used for the
withdrawal of cash, the issuance of bonds or sinking fund credit.
Sinking fund cash amounting to $100,000 or more held by the Mortgage
Trustee on December 31 of any year must be applied to the retirement of First
Mortgage Bonds. The Company may direct the Mortgage Trustee to use sinking fund
cash held by it to purchase First Mortgage Bonds in the open market or to invite
tenders of First Mortgage Bonds to it. If cash held by the Mortgage Trustee is
applied to the purchase of First Mortgage Bonds at less than par, an amount
equal to such discount must be paid to the Company.
Maintenance Fund
The Company is required to make expenditures for property additions and/or
to deposit with the Mortgage Trustee, cash (less, at the option of the Company,
credit for refundable prior lien bonds and First Mortgage Bonds theretofore or
then retired) annually beginning in 1946, in an amount not less than the
"minimum provision for depreciation." All cash so deposited with the Mortgage
Trustee may, during the next succeeding three years, be withdrawn by the Company
to the extent that the amount not less than that expended for property additions
exceeds the "minimum provision for depreciation."
So long as any First Mortgage Bonds are outstanding, the term "minimum
provision for depreciation" with reference to any period after 1952 means an
amount equal to the greater of (i) 15% of the gross operating revenues derived
from bondable property during such
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period after deducting the aggregate cost of electric energy and manufactured or
natural gas purchased during such period for resale in connection with the
operation of bondable property, less the charges to operating expense during
such period for current repairs and maintenance of bondable property, and (ii)
an amount computed at the rate of 2.25% per annum as applied to depreciable
electric utility property for each year or portion thereof embraced within such
period.
Modification or Amendment of Mortgage
Except as set forth in the next sentence, the rights of the bondholders
may be modified with the consent of the holders of 75% of the principal amount
of the First Mortgage Bonds of all series affected provided that no waiver of a
past default or the consequences thereof shall be effective unless approved by
the holders of not less than a majority of the principal amount of all the First
Mortgage Bonds at the time outstanding. However, no modification of the terms of
payment of principal, premium or interest and no modification permitting the
creation of additional prior or parity liens, reducing the percentage of the
principal amount of First Mortgage Bonds required for modification or depriving
the bondholders of the lien of the Mortgage, is effective against any bondholder
without such bondholder's consent.
Defaults and Notice Thereof
Events of default include default in the payment of principal and premium,
if any, of any of the First Mortgage Bonds; default for 60 days in payment of
interest on any of the First Mortgage Bonds; default in the payment of principal
or interest continued beyond the period of grace on any prior lien bonds;
default, for 60 days after notice, in the performance of any covenant in the
Mortgage; and bankruptcy, insolvency or reorganization (under certain
circumstances) of the Company. The Mortgage Trustee may withhold notice to
bondholders of default (except default in payment of principal, premium,
interest or sinking and improvement fund installments) if its responsible
officers determine that it is in the interest of the bondholders to do so.
Concerning the Mortgage Trustee
The Mortgage Trustee is permitted to engage in other transactions with the
Company, except that if it acquires any conflicting interest, as defined in the
Mortgage, it must eliminate it or resign and is required in certain cases to
share with the bondholders the benefits of payments received within four months
prior to default. The Mortgage Trustee is the Company's office or agency for the
payment and exchange of First Mortgage Bonds.
Direction by the holders of a majority in principal amount of the First
Mortgage Bonds then outstanding is necessary to require the Mortgage Trustee to
take action. The Mortgage Trustee may require reasonable indemnification before
being required to enforce the lien of the Mortgage. Holders of not less than 25%
in principal amount of outstanding First Mortgage Bonds or the Mortgage Trustee
may declare the principal and interest of all
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outstanding First Mortgage Bonds due upon the occurrence of a completed default,
but the holders of a majority in principal amount of the outstanding First
Mortgage Bonds may, under certain circumstances including the curing of such
default, annul any such declaration.
Satisfaction and Discharge of Mortgage
Upon the Company's making due provision for the payment of all of the
First Mortgage Bonds and paying all other sums due under the Mortgage, the
Mortgage shall cease to be of further effect and may be satisfied and discharged
of record.
Evidence as to Compliance with Mortgage Provisions
Compliance with the provisions of the Mortgage is evidenced by written
statements of Company officers or persons selected and paid by the Company. In
certain cases, opinions of counsel and certificates of an engineer, accountant,
appraiser or other expert (who in some instances must be independent) must be
furnished. The Mortgage requires that the Company furnish annually to the
Mortgage Trustee a certificate that the Company has complied with, and is not in
default under, the provisions of the Mortgage.
PLAN OF DISTRIBUTION
The Company may sell the Senior Notes: (1) directly to purchasers; (2) to
or through underwriters; or (3) through agents or dealers. The supplement to
this prospectus relating to each series of Senior Notes will set forth the terms
of the offering thereof, including the name or names of any such underwriters,
agents or dealers; the purchase price of and the net proceeds to the Company
from such sale; any underwriting discounts and commissions or agency fees and
other items constituting underwriters' or agents' compensation; the initial
public offering price; and any discounts or concessions allowed or reallowed or
paid to dealers. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
If underwriters are used in an offering, the Senior Notes will be acquired
by such underwriters for their own account and may be resold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale. The
Senior Notes may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering will be named in a supplement to this
prospectus relating to such offering and, if an underwriting syndicate is used,
the managing underwriter or underwriters will be set forth on the cover of such
supplement. Unless otherwise set forth in a supplement to this prospectus
relating thereto, the obligations of the underwriters to purchase the particular
Senior Notes will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all such Senior Notes if any are
purchased.
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If dealers are utilized in a sale of Senior Notes, the Company will sell
such securities to the dealers as principal. The dealers may then resell such
Senior Notes to the public at varying prices to be determined by such dealers at
the time of resale. The names of the dealers and the terms of the transaction
will be set forth in a supplement to this prospectus relating thereto.
The Senior Notes may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of the Senior Notes with respect to which this prospectus is delivered will
be named, and any commissions payable by the Company to such agent will be set
forth, in a supplement to this prospectus relating thereto. Unless otherwise
indicated in a supplement to this prospectus, any such agent will be acting on a
best efforts basis for the period of its appointment.
Any underwriters utilized may engage in stabilizing transactions and
syndicate covering transactions in accordance with Rule 104 under the Exchange
Act. Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the Senior Notes in the open market
after the distribution has been completed in order to cover syndicate short
positions. Such stabilizing transactions and syndicate covering transactions may
cause the price of the Senior Notes to be higher than it would otherwise be in
the absence of such transactions.
Agents, dealers and underwriters may be entitled, under agreements entered
into with the Company, to indemnification by the Company against certain
liabilities, including liabilities under the Securities Act, and to contribution
with respect to payments which such agents, dealers or underwriters may be
required to make in respect thereof. Agents, dealers and underwriters may be
customers of, engage in transactions with, or perform services for the Company
in the ordinary course of business.
Unless otherwise specified in a supplement to this prospectus, the Senior
Notes will not be listed on a national securities exchange. No assurance can be
given that any broker-dealer will make a market in any series of Senior Notes,
and, in any event, no assurance can be given as to the liquidity of the trading
market for any of the Senior Notes. A supplement to this prospectus will state,
if known, whether or not any broker-dealer intends to make a market in the
Senior Notes. If no such determination has been made, such supplement will so
state.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Berlack,
Israels & Liberman LLP, New York, New York and for any underwriters, agents or
dealers by Winthrop, Stimson, Putnam & Roberts, New York, New York. Winthrop,
Stimson, Putnam & Roberts may rely on the opinion of Berlack, Israels & Liberman
LLP as to
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matters of New Jersey law. Attorneys of Berlack, Israels & Liberman LLP own an
aggregate of 13,306 shares of the Common Stock of the Company's parent, GPU,
Inc.
EXPERTS
The consolidated financial statements and financial statement schedule,
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998, are incorporated herein by reference in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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